Invest in Communities to Advance Capitalism

I have long believed that innovation is not just about creating new products or services; it’s also about rethinking the very nature of an organization’s relationships.

Businesses have seen this unfold on at least two fronts during the past 20 years.

First, consider how the relationship between employers and employees has evolved from a paternalistic, command-and-control contract to a more collaborative, employee-driven model. Today, enlightened employers know that, if they want great people to perform at the top of their game, they must engage and care for employees’ well-being on a variety of fronts that go beyond a paycheck. At Starbucks, this shift in values can be seen in the health-care coverage and stock options we have long offered to part-time employees.

More recently, another big relationship shift has occurred between companies and consumers. The most innovative brands have dramatically changed the way they connect with customers by supplementing traditional marketing and advertising with social and digital media. The medium changes the nature of the dialogue, something Starbucks has experienced firsthand with its own Facebook presence, Twitter activity, and in-store Starbucks Digital Network.

Now, a third relationship-driven innovation is under way, and it has the potential to improve not just our businesses but also the role of corporations, and thus capitalism, in society. Specifically, it’s time to rethink how companies, both public and private, assist the communities we serve.

It is no longer enough to serve customers, employees, and shareholders. As corporate citizens of the world, it is our responsibility — our duty — to serve the communities where we do business by helping to improve, for example, the quality of citizens’ education, employment, health care, safety, and overall daily life, plus future prospects.

We must act not because making a positive difference is a nice thing to do. The escalating crisis of confidence around the world is a phenomenon linked not only the global financial crisis but also to the uncertainty surrounding many governments — from the Middle East’s transitional democracies and Europe’s debt-strapped countries to the U.S.’s inability to collaboratively solve its own serious problems. With public leaders unable to adequately address the needs of their citizens and fix teetering economies, the responsibility to pick up the slack must shift to private organizations.

The solutions are not obvious. Writing checks for charity, for example, won’t cut it. We must go deeper. We must invest the same creative muscle and resources we put toward our products into neighborhoods. We must ask how to fulfill the very real needs of communities in ways that are relevant to our business, take advantage of our strengths while being cost-effective and, yes, potentially profitable.

Again, this is not just about philanthropy. When looked at through the capitalistic lens, innovating the very nature of corporate-community relations is good business. Companies that hold on to the old-school, singular view of limiting their responsibilities to making a profit will not only discover it is a shallow goal but an unsustainable one. Values increasingly drive consumer and employee loyalties. Money and talent will follow those companies whose values are compatible with their own.

Quite simply, the time has come for corporations to extend their time, their products, their expertise, and their values in innovative ways. Two recent initiatives at Starbucks exemplify this point.

First, as part of our vision to further help the communities where we do business solve their own unique challenges, Starbucks has begun working closely with community-focused “change makers” — regional leaders and non-profits that are dedicated to improving the quality in their neighborhoods.

By plugging into local neighborhoods via an existing organization’s programs and accountability metrics, we believe Starbucks can create more tangible, sustainable improvements. Other companies will, we hope, follow suit and find their own ways to support, effective change makers.

We began with the fundamental thought that we could help put Americans back to work if we first thawed frozen channels of credit in local communities, enabling small businesses to expand. Partnering with Opportunity Finance Network, a nationally recognized nonprofit, we established a fund to do just that: lend to small businesses, the primary creators of new jobs.

An initial $5 million to seed the fund will come from The Starbucks Foundation. Beyond that, every Starbucks customer who contributes $5 or more to the fund will receive a limited-edition red, white, and blue wristband with the word ‘Indivisible’ on the clasp. One hundred percent of the money raised into a nationwide fund will go to support small business lending.

This program, Create Jobs for USA, will begin November 1, 2011. I cannot predict the degree of its success, but I am incredibly proud of its intent as well as imaginative way in which it, too, redefines how Starbucks interacts with and serves communities in need.

We are not done. These two initiatives simply pave the way for us to have a more large-scale impact.

How can companies reinvent capitalism? By reimagining the ways in which we engage with communities.

There is no time to waste. None of us can wait for governments to create jobs, improve healthcare and strengthen any of the other safety nets our societies have come to expect and need.

Take a page from the playbook that makes us succeed in the marketplace and put the same resources and innovative muscle into redefining corporate citizenship. This is not charity. It’s imperative. Let’s get to work.

Howard Schultz is chairman, president, and CEO of Starbucks Coffee Company. He has led a transformation of the company that has renewed its focus on its coffee heritage, innovation, and the customer experience and has allowed it to achieve sustainable, profitable growth.